DEF 14A of STERIS plc
Filed Jun 7, 2023 · FY20230001193125-23-162577
TABLE OF CONTENTS
| NON-EMPLOYEE DIRECTOR COMPENSATION | 86 | | Description of Director Compensation for Fiscal 2023 | 86 | | Director Compensation Table for Fiscal 2023 | 87 | | NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES | 88 | | OWNERSHIP OF VOTING SECURITIES | 89 | | Greater than 5% Owners | 89 | | Stock Ownership of Directors and Executive Officers | 90 | | Shares and Career Restricted Stock Units | 91 |
Director Nominee Highlights
Director Nominee Highlights Each of the ten director nominees is elected annually by a majority of votes cast. Select information regarding each director is specified below. For more information about our nominees, see pages 13 through 17 of this Proxy Statement.
Director Nominee Highlights
| | | | | Board Committee Memberships at 3/31/23 | | | | | | | Name | Age | Director Since | Independent | Audit | Compensation and Organization Development | Nominating and Governance | Compliance and Technology | Other Public Company Boards | Diversity | | Dr. Esther M. Alegria Founder and Chief Executive Officer of APIE Therapeutics, Inc. | 64 | 2023 | ✓ | | | | | 1 | ✓ | | Richard C. Breeden Chairman & CEO Breeden Capital Management | 73 | 2008 | ✓ | | | ✓ | | — | | | Daniel A. Carestio President and CEO STERIS | 50 | 2021 | | | | | ✓ | — | | | Cynthia L. Feldmann Former President & Founder Jetty Lane Associates | 70 | 2005 | ✓ | ✓ | | | | 3 | ✓ | | Christopher S. Holland Former Senior VP & CFO C.R. Bard | 56 | 2020 | ✓ | ✓ | ✓ | | | 1 | | | Dr. Jacqueline B. Kosecoff Managing Partner, Moriah Partners, LLC | 73 | 2003 | ✓ | | | ✓ | | 4(1) | ✓ | | Paul E. Martin Former Senior V.P. & CIO Baxter International | 65 | 2021 | ✓ | | ✓ | | ✓ | 3 | ✓ | | Dr. Nirav R. Shah Member of Stanford University Faculty | 51 | 2018 | ✓ | | ✓ | | ✓ | — | ✓ | | Dr. Mohsen M. Sohi CEO of Freudenberg SE | 64 | 2005 | ✓ | | | | | 1 | | | Dr. Richard M. Steeves Former CEO and Director of Synergy Health | 61 | 2015 | ✓ | ✓ | | | | — | |
Director Nominee Highlights
= Chairperson
Director Nominee Highlights
| (1) Dr. Kosecoff has resigned from the Board of GoodRx Holdings effective June 30, 2023. |
Director Nominee Highlights
| Tenure Balance | Independence | Diversity | | | | |
Director Nominee Highlights
| Proxy Summary: Director Skills Matrix |
Nominees for Election as Directors
Nominees for Election as Directors Biographical and other background information concerning each nominee for Director is set forth below. This information includes each nominee’s principal occupation as well as a discussion of the specific experience, qualifications, attributes, and skills of each nominee that led to the Board’s conclusion that such nominee should serve as a Director. Ages and other biographical information provided for all Directors are as of June 7, 2023. In addition, set forth below is the period during which each nominee has served as a Director of STERIS. For those persons who served as Directors or executives of Old STERIS immediately prior to the Redomiciliation and STERIS Corporation immediately prior to the Combination, the specified period includes their periods of service as Directors or executives of Old STERIS or STERIS Corporation, as the case may be, as STERIS’s predecessors. The information presented below has been confirmed by each nominee for purposes of its inclusion in this Proxy Statement.
Nominees for Election as Directors
| | Dr. Esther M. Alegria Dr. Alegria has served as the Founder and Chief Executive Officer of APIE Therapeutics, a preclinical stage pharmaceutical company, since 2020. Dr. Alegria was recommended to the Nominating and Governance Committee for her initial election to the Company’s Board by a third-party search firm. From 2016 to 2020, Dr. Alegria served as the President and Senior Executive Advisor at Catalyst Excel & Advance, an advisory firm providing operational guidance to senior executives working to launch new pharmaceutical and biopharmaceutical companies. From 2005 to 2015, Dr. Alegria held positions of increasing responsibility at Biogen, Inc., most recently as Senior Vice President, Global Manufacturing, where she was responsible for the company’s successful manufacturing operations in Denmark, Massachusetts and North Carolina. Prior to 2005, Dr. Alegria held positions at Banner Pharmacaps, Inc. and Wyeth LLC. Since 2021, Dr. Alegria has served as a director and member of the Audit and Corporate Governance committees of AVID Bioservices, Inc. Qualifications. Dr. Alegria’s extensive operational and leadership experience in the biopharmaceutical industry provides our Board insight regarding the operational and strategic challenges facing STERIS’s Life Sciences and Applied Sterilization Technologies segments. | | Founder and Chief Executive Officer of APIE Therapeutics Director since: 2023 Age: 64 Committees: None | |
Nominees for Election as Directors
| | Richard C. Breeden Mr. Breeden has served as Chairman and Chief Executive Officer of Breeden Capital Management LLC since 2005. Since 1996 he has also been Chairman of Richard C. Breeden & Co., LLC, a professional services firm providing consulting services. Mr. Breeden also leads RCB Fund Services LLC, a firm providing claims management services to U.S. government agencies. Mr. Breeden has previously handled asset distributions to victims of unlawful conduct at WorldCom, Enron, Adelphia, Royal Dutch Shell, British Petroleum, JPMorgan Chase, and other companies. Mr. Breeden served as Chairman of the SEC from 1989 to 1993. Qualifications. Mr. Breeden’s experience as Chairman of the SEC, CEO of an investment advisory firm, and a director of several public companies provides our Board with extensive managerial, governance and regulatory insights regarding issues facing public companies. As an investor, Mr. Breeden also provides valuable insight on issues such as shareholder return, executive compensation programs, and capital structure. | | Chairman and Chief Executive Officer of Breeden Capital Management LLC Director since: 2008 Age: 73 Committees: Audit Committee (Chair) Nominating and Governance Committee | |
Nominees for Election as Directors
| | Daniel A. Carestio Mr. Carestio has served as President and CEO of the Company since July 2021. He served as Senior Vice President and Chief Operating Officer from August 2018 to July 2021. He served as Senior Vice President, Sterilization and Disinfection from February 2018 to July 2018 and as Senior Vice President, STERIS Applied Sterilization Technologies and Life Sciences from August 2015 to February 2018. Qualifications. Mr. Carestio’s many years of experience in all operating aspects of STERIS’s business and familiarity with healthcare and related industries and the Company’s Customers. Mr. Carestio leads the management team, assists the Board in its oversight of the Company, and provides unique perspectives into healthcare and related industries and our operations, direction and strategies. | | President and Chief Executive Officer of STERIS plc Director since: 2021 Age: 50 Committees: Compliance and Technology Committee | |
Nominees for Election as Directors
| | Cynthia L. Feldmann Ms. Feldmann is a retired certified public accountant with a Bachelor of Science in Accounting from Boston College and 27 years of experience in two large global accounting firms. From 2003 to 2005, Ms. Feldmann served as the Life Sciences Business Development Officer for the Boston law firm Palmer & Dodge, LLP. From 1994 to 2002, Ms. Feldmann was a partner with KPMG LLP, primarily serving as Partner-in-Charge of its National Medical Technologies Practice. From 1975 to 1994, Ms. Feldmann was employed by Coopers & Lybrand (now PricewaterhouseCoopers LLP), and during that time was named Partner-in-Charge of its life sciences practice. Ms. Feldmann served as a director of Hanger, Inc. until January 2018. Ms. Feldmann is a director of, and a member of the Nominating Committee and chairs the Audit Committee of UFP Technologies, Inc. and is a director of and chair of the Audit Committee of Frequency Therapeutics, and is a director of and serves on the Science, Agtech and & Technology Committee of Alexandria Real Estate Equities, Inc. Qualifications. Ms. Feldmann’s experience as Partner-in-Charge of a national medical technologies practice and Life Sciences practice for leading public accounting firms and director of publicly traded companies. Ms. Feldmann’s overall experience and financial expertise supports the Board’s oversight of critical financial policy, reporting, and risk matters encountered by public companies. | | Retired, Former President and Founder of Jetty Lane Associates Director since: 2005 Age: 70 Committees: Audit Committee Nominating and Governance Committee (Chair) | |
Nominees for Election as Directors
| | Christopher S. Holland Mr. Holland is former Senior Vice President and Chief Financial Officer of C.R. Bard, a developer, manufacturer, and marketer of medical technologies, from May 2012 until its December 2017 acquisition by Becton, Dickinson and Company. From 2015 through 2017, Mr. Holland’s responsibilities also included business development, corporate marketing, reimbursement, healthcare economics and strategy. From 2013 through 2015, he also had operating responsibility for Bard Medical Division. Earlier, Mr. Holland was Senior VP, Finance, and Treasurer of Aramark Corporation, a global provider of food, facilities and uniform services, from 2006 through 2012, and Vice President and Treasurer from 2003 to 2006. Prior to joining Aramark, he served as Vice President and medical device sector head at J.P. Morgan and Company, Inc. from 1999 to 2003. Prior to that, Mr. Holland held various positions of increasing responsibility at J.P. Morgan. He also has served as a director of Jabil Inc. since January 2018 and is Chair of the Audit Committee and a member of the Cybersecurity Committee of Jabil Inc. Qualifications. Mr. Holland’s thirty plus years of combined professional experience as a finance executive and investment banker, including experience as the CFO of a publicly traded medical technologies company. Mr. Holland’s extensive financial experience and experience relating to the healthcare industry, medical devices and technology, provide our Board with invaluable experience and expertise relative to those matters. | | Retired, Former Senior Vice President and Chief Financial Officer of C.R. Bard Director since: 2020 Age: 56 Committees: Audit Committee Compensation and Organization Development Committee | |
Nominees for Election as Directors
| | Dr. Jacqueline B. Kosecoff Dr. Kosecoff is Managing Partner of Moriah Partners, LLC, a private equity firm focused on health services and technology since 2012, and Senior Advisor to Warburg Pincus LLC, a private equity fund. She also has served as a member of the Executive Advisory Board of SAP America, Inc., a software and enterprise applications provider, from November 2010 through May 2017. From October 2007 to November 2011, Dr. Kosecoff served as Chief Executive Officer of OptumRx (formerly named Prescriptions Solutions), a pharmacy benefits management company and subsidiary of UnitedHealth Group, and continued to serve as a senior advisor to OptumRx from December 2011 to February 2012. Dr. Kosecoff served as Chief Executive Officer of Ovations Pharmacy Solutions, a UnitedHealth Group company, from December 2005 to October 2007. From July 2002 to December 2005, Dr. Kosecoff served as Executive Vice President, Specialty Companies, of PacifiCare Health Systems, Inc., one of the nation’s largest consumer health organizations. From 1998 to 2002, Dr. Kosecoff was President and Founder of Protocare, Inc., a firm involved in the development and testing of drugs, devices, biopharmaceutical and nutritional products, and consulting and analytic services. Dr. Kosecoff is currently a director of Houlihan Lokey, TriNet Group, Inc. and Alignment Healthcare. Dr. Kosecoff has resigned from the Board of GoodRx Holdings effective June 30, 2023. Dr. Kosecoff previously served as a director of athenahealth, Inc. until February 2019 and of Sealed Air Corporation until May 2021. Qualifications. Dr. Kosecoff’s experience as Chief Executive Officer for a number of large healthcare organizations and a director of publicly traded companies. Dr. Kosecoff’s background provides our Board with extensive managerial, government and regulatory experiences, and insight in the healthcare industry. | | Managing Partner of Moriah Partners, LLC Director since: 2003 Age: 73 Committees: Compensation and Organization Development Committee (Chair) Nominating and Governance Committee | |
Nominees for Election as Directors
| | Paul E. Martin Mr. Martin is former Senior Vice President & Chief Information Officer of Baxter International, a multinational health care company, from January 2011 to October 2020. Mr. Martin serves as director of Unisys Corporation, is a member of its Audit and Finance Committee and Chair of its Security and Risk Committee. Mr. Martin also serves as director of Owens Corning and is a member of the Audit and Finance Committees. From January 2021 to October 2022, Mr. Martin served as a member of the board of directors of Ping Identity Holding Corp. Qualifications. Mr. Martin’s extensive professional management experience as an information technology executive, his technology and security risk experience and his financial experience. Mr. Martin’s IT experience as well as international experience and life sciences and healthcare experience provide the Company with invaluable resources and strengthen our Board’s oversight of information security and healthcare matters. | | Retired, Former Senior Vice President & Chief Information Officer of Baxter International Director since: 2021 Age: 65 Committees: Compensation and Organization Development Committee Compliance and Technology Committee | |
Nominees for Election as Directors
| | Dr. Nirav R. Shah Dr. Shah has served on the faculty of Stanford University since August 2018 and as Chief Medical Officer of American Health Associates since March 2022. Previously, Dr. Shah served from July 2020 through March 2022 as Chief Medical Officer of doc.ai, inc., and its successor, Sharecare Inc., a digital healthcare platform company. Dr. Shah also served as Commissioner of Health of the State of New York from January 2011 to May 2014 and as Senior Vice President and Chief Operating Officer for Clinical Operations for Kaiser Permanente Southern California from May 2014 to October 2017. Dr. Shah is a graduate of Harvard College and Yale School of Medicine and is Board Certified in Internal Medicine. Qualifications. Dr. Shah’s experience at one of the nation’s leading public health agencies and service as COO for Clinical Operations of one of America’s leading health care providers and not-for-profit health plans. Dr. Shah provides the Board with years of policy and regulatory experience, management experience in our industry and experience as a practicing physician, as well as a new area of focus in innovative models in healthcare. | | Professor at Stanford University and Chief Medical Officer of American Health Associates Director since: 2018 Age: 51 Committees: Compensation and Organization Development Committee Compliance and Technology Committee | |
Nominees for Election as Directors
| Chief Executive Officer at Freudenberg SE Director since: 2005 Age: 64 Committees: None | Dr. Mohsen M. Sohi Since July 2012, Dr. Sohi has served as Chief Executive Officer of Freudenberg SE, a general multi-industry company serving industries that include automotive, medical, aerospace, oil and gas, and power generation and transmission. From July 2010 to June 2012, Dr. Sohi served as Managing Partner of Freudenberg and Co. From March 2003 through June 2010, Dr. Sohi served as President and Chief Executive Officer of Freudenberg-NOK, a privately-held joint venture partnership between Freudenberg and NOK Corp. of Japan, one of the world’s largest producers of elastomeric seals and custom molded products for automotive and other applications. From January 2001 to March 2003, Dr. Sohi was with NCR Corporation, a leading global technology company, most recently as the Senior Vice President, Retail Solutions Division. Prior to NCR, Dr. Sohi was with Honeywell International Inc. and its pre-merger constituent, Allied Signal, Inc., providers of aerospace, automation and control solutions, specialty materials, and transportation systems, for 14 years, serving from July 2000 to January 2001 as President, Honeywell Electronic Materials. Dr. Sohi previously served as a director of Aviat Networks, Inc. (formerly known as Harris Stratex Networks, Inc.) from 2007 until January 2015 and Hayes Lemmerz International from 2004 until 2009. Dr. Sohi previously served as a member of the Supervisory Board of ZF AG from 2018 until March 2023 and of the Board of Tetra Laval Group. Since 2021, Dr. Sohi has served as a director and member of the Audit Committee and Human Capital and Compensation Committee of Baker Hughes Company. Qualifications. Dr. Sohi’s experience as President and Chief Executive Officer of international industrial companies and international operating experience. Dr. Sohi provides our Board with substantial strategic planning, manufacturing, operational excellence, executive development, succession planning, and international experience, which are important factors for the Board’s oversight and the Company’s strategies. |
Nominees for Election as Directors
| | Dr. Richard M. Steeves Dr. Steeves served as Chief Executive Officer and director of Synergy Health plc, a provider of specialty outsourced services to the healthcare and related industries, from 1992 until 2015, and founded the Company in 1991. Dr. Steeves served as a director of Gama Aviation plc from January 2018 to February 2019. Dr. Steeves has served since July 2017 as Executive Chairman of Advanced Research Cryptography Ltd. and, since October 2017 as Chairman of TrustFlight Ltd. Qualifications. Dr. Steeves’s previous role as founder and former Chief Executive Officer of Synergy Health plc. Dr. Steeves provides the Board with extensive legacy business knowledge, as well as a strong technical and science background and knowledge of issues facing healthcare and medical device companies, particularly in the U.K. and Europe. | | Retired, Former Chief Executive Officer of Synergy Health plc Director since: 2015 Age: 61 Committees: Audit Committee Compliance and Technology Committee (Chair) | |
Nominees for Election as Directors
THE MEMBERS OF OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE ELECTION OF EACH OF DR. ESTHER M. ALEGRIA, RICHARD C. BREEDEN, DANIEL A. CARESTIO, CYNTHIA L. FELDMANN, CHRISTOPHER S. HOLLAND, DR. JACQUELINE B. KOSECOFF, PAUL E. MARTIN, DR. NIRAV R. SHAH, DR. MOHSEN M. SOHI, AND DR. RICHARD M. STEEVES AS DIRECTORS OF THE COMPANY.
Nominees for Election as Directors
| PROPOSAL 2—RESOLUTION REGARDING RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Nominees for Election as Directors
The Audit Committee has appointed Ernst & Young LLP as STERIS’s independent registered public accounting firm for the fiscal year ending March 31, 2024. Ernst & Young LLP was retained in 2015 as the independent registered public accounting firm of our predecessor entity, Old STERIS, and was first retained in 1989 as the independent registered public accounting firm of Old STERIS’s predecessor entity, STERIS Corporation, and served in that capacity continuously through the Combination and the Redomiciliation. The appointment was based upon the considerations described in the Section “Independent Registered Public Accounting Firm” that begins on page 41 including the evaluation described therein. Although the ratification of this appointment is not required to be submitted to a vote of the shareholders, the Board and Audit Committee believe it appropriate as a matter of corporate governance policy to request that the shareholders ratify the appointment of the independent registered public accounting firm for the fiscal year ending March 31, 2024. If this proposal does not receive the affirmative vote of the holders of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual Meeting, the Audit Committee will reconsider the appointment. We anticipate that the lead audit partner from Ernst & Young LLP will be present at the Annual Meeting. The lead audit partner (or other attending representative) will be given the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to any appropriate questions that may be submitted by shareholders at the Annual Meeting. OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING MARCH 31, 2024.
Nominees for Election as Directors
| PROPOSAL 3—RESOLUTION APPOINTING ERNST & YOUNG CHARTERED ACCOUNTANTS AS THE COMPANY’S IRISH STATUTORY AUDITOR |
Nominees for Election as Directors
The Irish Companies Act requires that our statutory auditors be appointed at each annual general meeting of shareholders, to hold office from the conclusion of the annual general meeting until the conclusion of the next annual general meeting. Ernst & Young Chartered Accountants has served as our Irish statutory auditor since the Redomiciliation and is affiliated with Ernst & Young LLP, who served as the U.K. statutory auditor of Old STERIS prior to the Redomiciliation from 2015 to 2019. Our Audit Committee has recommended that Ernst & Young Chartered Accountants be appointed as our Irish statutory auditor. If this resolution does not receive the affirmative vote of the holders of a majority of the shares cast in person or by proxy at the Annual Meeting, the Board may appoint a person or firm to fill the vacancy. OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE APPOINTMENT OF ERNST & YOUNG CHARTERED ACCOUNTANTS AS OUR IRISH STATUTORY AUDITOR TO HOLD OFFICE FROM THE CONCLUSION OF THE ANNUAL MEETING UNTIL THE CONCLUSION OF THE NEXT ANNUAL GENERAL MEETING OF THE COMPANY.
Nominees for Election as Directors
| PROPOSAL 4—RESOLUTION TO AUTHORIZE THE BOARD OF DIRECTORS OR THE AUDIT COMMITTEE OF THE BOARD TO DETERMINE THE REMUNERATION OF ERNST & YOUNG CHARTERED ACCOUNTANTS AS THE COMPANY’S IRISH STATUTORY AUDITOR |
Nominees for Election as Directors
Under the Irish Companies Act, the remuneration of our Ireland statutory auditor must be fixed by the shareholders in a general meeting or in such other manner as the shareholders may determine. We are asking our shareholders to authorize our Board or the Audit Committee to determine Ernst & Young Chartered Accountant’s remuneration as our Irish statutory auditor. It is expected that the Board would delegate the authority to determine the remuneration of the Irish statutory auditor for the Company’s fiscal year ending March 31, 2024 to the Audit Committee in accordance with the Board’s procedures and applicable law. OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE AUTHORIZATION OF THE BOARD OF DIRECTORS OR AUDIT COMMITTEE TO DETERMINE OUR IRISH STATUTORY AUDITOR’S REMUNERATION.
Nominees for Election as Directors
| PROPOSAL 5—ADVISORY RESOLUTION ON NAMED EXECUTIVE OFFICER COMPENSATION |
Nominees for Election as Directors
We believe that our compensation policies and procedures are based on a pay-for-performance philosophy and are aligned with the long-term interests of our shareholders. However, to obtain the specific input of shareholders with respect to these policies and procedures in accordance with the provisions of the United States Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and Section 14A of the United States Securities Exchange Act of 1934 (“Exchange Act”), the proposal described below provides shareholders with the opportunity to approve, on a non-binding advisory basis, the compensation of our named executive officers. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to provide input to endorse or not endorse the compensation of the Company’s named executive officers. The Company’s predecessors, STERIS Corporation and Old STERIS, conducted say on pay votes every year beginning in 2010 and continuing through 2018. We have held annual say on pay votes since 2019 and expect to continue to hold our say on pay votes on an annual basis. We expect to hold our next say on pay vote at our 2024 annual general meeting of shareholders. We strongly encourage you to carefully review the Compensation Discussion and Analysis and compensation tables and narrative discussions and related material beginning on page 44 of this Proxy Statement. Thereafter, we request your input on the compensation of the Company’s named executive officers through your vote on the following resolution: “Resolved, that the shareholders approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis and the tabular and narrative disclosures contained in the Company’s Proxy Statement dated June 7, 2023.” The non-binding resolution to approve the compensation of our named executive officers will be considered adopted if approved by the affirmative vote of the holders of a majority of the votes cast by shareholders represented in person or by proxy and entitled to vote thereon. Because your vote is advisory, it will not be binding upon the Board or the Compensation and Organization Development Committee. However, the Compensation and Organization Development Committee will take into account the outcome of the vote when considering future executive compensation decisions. OUR BOARD OF DIRECTORS AND COMPENSATION AND ORGANIZATION DEVELOPMENT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
Nominees for Election as Directors
| PROPOSAL 6—ADVISORY RESOLUTION ON THE FREQUENCY OF THE SHAREHOLDER ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION |
Nominees for Election as Directors
The Dodd-Frank Act also requires us to provide our shareholders every six years the opportunity to indicate how frequently we should seek a non-binding advisory vote regarding the compensation of our named executive officers (such as the one provided in proposal 5 included on page 21 of this Proxy Statement). By voting on this proposal 6, shareholders may indicate whether they would prefer a non-binding advisory vote on named executive officer compensation once every one, two, or three years. A shareholder advisory vote on this issue was last taken in August 2017 by the shareholders of Old STERIS. At that time the STERIS board recommended that the shareholders approve, and the shareholder advisory vote approved, a frequency of every year. After consideration of this proposal, our Board continues to believe that an annual advisory vote on named executive officer compensation is the most appropriate frequency alternative for STERIS, and therefore our Board recommends that you vote for an advisory vote on the executive compensation of our named executive officers to be held every year. In formulating its recommendation, our Board considered that an annual advisory vote on executive compensation will allow our shareholders to provide us with their direct input on our compensation philosophy, policies, and practices as disclosed in the Proxy Statement on a regular and frequent basis. Additionally, an annual non-binding advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our shareholders on corporate governance matters and our executive compensation philosophy, policies, and practices. We understand that our shareholders may have different views as to what is the best approach for STERIS, and we look forward to hearing from our shareholders on this proposal. We request your input on your preferred voting frequency regarding named executive compensation by choosing the option of every one year, two years, or three years. The accompanying proxy card allows shareholders to vote for the advisory vote on executive compensation to occur every 1, 2 or 3 years, or to abstain from voting on this matter. Because this vote is advisory it will not be binding upon the Board or the Compensation and Organization Development Committee. However the Compensation and Organization Development Committee will take into account the outcome of the vote when considering when to hold the next shareholder advisory vote on executive compensation. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF EVERY “ONE YEAR” FOR THE FREQUENCY OF THE ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
Nominees for Election as Directors
| PROPOSAL 7—RENEWAL OF THE BOARD’S AUTHORITY TO ISSUE SHARES UNDER IRISH LAW |
Nominees for Election as Directors
Under Irish law, the directors of an Irish public limited company must have authority from the company’s shareholders to issue shares and to grant rights to acquire shares (e.g., pursuant to options, warrants and other convertible securities), including shares that are part of the company’s authorized but unissued share capital. This requirement does not apply to the issue of shares and the grant of rights to acquire shares to employees or former employees under an employees’ share scheme. Under the Board’s current authority, which is included in STERIS’s Articles, the Board is authorized to issue shares and to grant rights to acquire shares up to the full amount of STERIS’s authorized but unissued share capital. This authority will expire on March 27, 2024. We are presenting this proposal to renew the Board’s authority to issue authorized but unissued shares and to grant rights to acquire such shares on the terms set forth below. This proposal is in line with customary practice and governance standards applicable to public companies incorporated in Ireland and listed on U.S. markets. The proposed authority is more limited than the Board’s current authority. If this proposal is not passed, STERIS will have a limited ability to issue new Ordinary Shares after March 27, 2024. In line with customary practice and applicable governance standards, we are seeking authority from our shareholders at the Annual Meeting for the Board to issue, and/or grant rights to acquire, shares up to a maximum number which is equal to approximately 20% of our issued ordinary share capital as of May 30, 2023 (the latest practicable date before this Proxy Statement). The proposed authority is for a period expiring on the earlier of (i) the date of our next annual general meeting and (ii) the date which is 15 months from the date of our Annual Meeting, unless otherwise varied, revoked or renewed. The Board expects to propose renewals of this authority on a regular basis at our annual general meetings in subsequent years. Granting the Board authority to issue shares is a routine matter for public companies incorporated in Ireland and is consistent with Irish market practice. This renewal of authority, which is more limited than the Board’s current authority, is fundamental to our business and enables us to issue shares (and/or rights to acquire shares), including, if applicable, in connection with funding acquisitions and raising capital. We are not asking you to approve an increase in our authorized share capital or to approve a specific issue of shares. Instead, approval of this proposal will only grant the Board the authority to issue, and grant rights to acquire, shares that are already included in our authorized share capital under our articles of association. In addition, because we are a NYSE-listed company, our shareholders continue to benefit from the protections afforded to them under the rules and regulations of the NYSE and the SEC, including those rules that limit our ability to issue shares in specified circumstances without obtaining shareholder approval. This authority is required as a matter of Irish law and is not otherwise required for other companies listed on the NYSE. Accordingly, approval of this resolution would merely place us on equal footing with other NYSE-listed companies.
Nominees for Election as Directors
| Proposal 7: Renewal of the Board’s Authority to Issue Shares Under Irish Law |
Nominees for Election as Directors
Accordingly, the following resolution will be submitted to our shareholders for approval, as an ordinary resolution, at the Annual Meeting: “Resolved, that the directors be and they are, with effect from the passing of this resolution, hereby generally and unconditionally authorized to exercise all powers of the Company to allot and issue relevant securities (within the meaning of section 1021 of the Companies Act 2014, as amended) up to an aggregate nominal value of US$19,730 (which represents 19,730,000 shares) (being equivalent to approximately 20% of the aggregate nominal value and number of the issued ordinary shares in the capital of the Company as of May 30, 2023 (the last practicable date before this proxy statement)) and the authority conferred by this resolution shall expire on the earlier of (i) the date of the Company’s next annual general meeting and (ii) the date that is 15 months from the passing of this resolution, unless previously renewed, varied or revoked by the Company, provided that the Company may, before such expiry, make an offer or agreement which would, or might, require relevant securities to be allotted and issued after such expiry and, in that case, the directors may allot and issue relevant securities in pursuance of any such offer or agreement as if the authority conferred by this resolution had not expired.” This resolution to authorize the Board to issue shares under Irish law will be considered adopted as an ordinary resolution if approved by the affirmative vote of the holders of a majority of the votes cast by shareholders represented in person or by proxy at the Annual Meeting and entitled to vote thereon. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RENEWAL OF THE BOARD’S AUTHORITY TO ISSUE SHARES UNDER IRISH LAW.
Nominees for Election as Directors
| PROPOSAL 8—RENEWAL OF THE BOARD’S AUTHORITY TO OPT-OUT OF STATUTORY PRE-EMPTION RIGHTS UNDER IRISH LAW |
Nominees for Election as Directors
Under Irish law, unless its directors are otherwise authorized and empowered to opt-out, when an Irish public limited company proposes to issue, or grant rights to acquire, shares for cash, the company is required to first offer those shares or rights on the same or more favorable terms to existing shareholders of the company on a pro rata basis (commonly referred to as statutory pre-emption rights). Statutory pre-emption rights do not apply to the issue of shares or the grant of rights to acquire shares (i) for cash to employees or former employees under an employees’ share scheme, or (ii) for non-cash consideration, such as on a share-for-share transaction. The Board currently is authorized and empowered to opt-out of statutory pre-emption rights under STERIS’s articles of association. Under this authority, the Board is empowered to issue shares and to grant rights to acquire shares up to the full amount of STERIS’s authorized but unissued share capital without regard to statutory pre-emption rights. This authority will expire on March 27, 2024. We are presenting this proposal to renew the Board’s authority to opt-out of statutory pre-emption rights on the terms set forth below. This proposal is in line with customary practice and governance standards applicable to public companies incorporated in Ireland and listed on U.S. markets. The proposed authority is more limited than the Board’s current authority. In line with customary practice and applicable governance standards, we are seeking authority from our shareholders at the Annual Meeting to empower the Board to opt-out of statutory pre-emption rights in respect of (i) the issue of shares for cash in connection with any rights’ issue and (ii) the issue, and/or grant of rights to acquire, shares for cash without regard to statutory pre-emption rights, up to a maximum number which is equal to approximately 20% of our issued ordinary share capital as of May 30, 2023 (the latest practicable date before this Proxy Statement), provided that, insofar as it relates to shares which represent greater than 10% in number of our issued ordinary share capital as of May 30, 2023, such authority is to be used only for the purposes of an acquisition or a specified capital investment which is announced contemporaneously with the issue, or which has taken place in the preceding six month period and is disclosed in the announcement of the issue. The proposed authority is for a period expiring on the earlier of (i) the date of our next annual general meeting and (ii) the date which is 15 months from the date of our Annual Meeting, unless otherwise varied, renewed or revoked. The Board expects to propose renewals of this authority on a regular basis at our annual general meetings in subsequent years. Granting the Board this authority is a routine matter for public companies incorporated in Ireland and is consistent with Irish market practice. Similar to the authorization sought under Proposal 7 in this Proxy Statement, this renewal of authority is fundamental to our business and enables us to issue shares and rights to acquire shares on a non-pre-emptive basis, including, if applicable, in connection with funding acquisitions and raising capital. We are not asking you to approve an increase in our authorized share capital or to approve a specific issue of shares. Instead, approval of this proposal will only grant the Board the authority to issue, and grant rights to acquire, shares that are already included in our authorized share capital under our articles of association. Without this authorization, in each case where we issue shares or grant rights to acquire shares for cash after March 27, 2024, we would first have to offer those shares or rights on the same or more favorable terms to all of our existing shareholders, which could cause delays in the completion of acquisitions and the raising of capital for our business. This authorization is required as a matter of Irish law and is not otherwise required for other companies listed on the NYSE. Accordingly, approval of this resolution will merely place us on equal footing with other NYSE-listed companies. Accordingly, the following resolution will be submitted to our shareholders for approval, as a special resolution, at the Annual Meeting: “Resolved, that, subject to and conditional on the passing of the resolution in respect of Proposal 6, as set out above, and with effect from the passing of this resolution, the directors be and are hereby empowered pursuant to section 1023 of the Companies Act 2014, as amended (the “Act”), to allot and issue equity securities (within the meaning of section 1023 of the Act) for cash pursuant to the authority conferred by the said Proposal 7 as if section 1022(1) of the Act did not apply to any such allotment, provided that this power shall be limited to:
Nominees for Election as Directors
| (a) the allotment and issue of equity securities in connection with a rights’ issue in favor of the holders of ordinary shares (including rights to subscribe for, or convert other securities into, ordinary shares) where the equity securities respectively attributable to the interests of such holders are proportional (as nearly as may be practicable) to the respective numbers of ordinary shares held by them (but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with any treasury shares, fractional entitlements that would otherwise arise, record dates or with legal or practical problems under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory, or otherwise); and |
Nominees for Election as Directors
| (b) the allotment and issue (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal value of US$19,730 (which represents 19,730,000 shares) (being equivalent to approximately 20% of the aggregate nominal value and number of the issued ordinary shares in the capital of the Company as of May 30, 2023 (the latest practicable date before this proxy statement)), provided that any amount of equity securities above an aggregate nominal value of US$9,865 (which represents 9,865,000 shares) (being equivalent to approximately 10% of the aggregate nominal value and number of the issued ordinary shares in the capital of the Company as of May 30, 2023), is to be used only for the purpose of an acquisition or a specified capital investment which is announced contemporaneously with the issue, or which has taken place in the preceding six month period and is disclosed in the announcement of the issue, |
Nominees for Election as Directors
and, in each case, the authority conferred by this resolution shall expire on the earlier of (i) the date of the Company’s next annual general meeting and (ii) the date that is 15 months from the passing of this resolution, unless previously renewed, varied or revoked, provided that the Company may, before such expiry, make an offer or agreement, which would, or might, require any such securities to be allotted and issued after such expiry, and in that case, the directors may allot and issue equity securities in pursuance of any such offer or agreement as if the authority conferred by this resolution had not expired.” This resolution to authorize and empower the Board to opt out of statutory pre-emption rights under Irish law will be considered adopted if approved by the affirmative vote of the holders of at least seventy-five percent of the votes cast by shareholders represented in person or by proxy at the Annual Meeting and entitled to vote thereon. In addition, this proposal is conditional upon the approval of Proposal 7, as required by Irish law. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RENEWAL OF THE BOARD’S AUTHORITY TO OPT-OUT OF STATUTORY PRE-EMPTION RIGHTS UNDER IRISH LAW.
Nominees for Election as Directors
| PROPOSAL 9—RESOLUTION TO TRANSACT SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING |
Nominees for Election as Directors
The Board is not aware of any business to be acted upon at the Annual Meeting other than that described in this Proxy Statement. If any other business properly comes before the Annual Meeting or any adjournment thereof, the proxy holders (as indicated on the accompanying proxy card or cards) will vote the proxies according to their best judgment and to the extent permitted by applicable law with respect to such matters in their discretion. *********************************************************************************************************** UNLESS OTHERWISE SPECIFIED, THE PROXY HOLDERS WILL VOTE “FOR” PROPOSALS 1 THROUGH 5 AND 7 THROUGH 8, AND FOR EVERY “ONE YEAR” FOR PROPOSAL 6. ***********************************************************************************************************
Nominees for Election as Directors
| BOARD OF DIRECTORS INFORMATION |
Compensation Governance Practices
| What the Company Does | What the Company Does Not Do | | • Hold an annual say on pay advisory vote for shareholders. • Engage independent outside compensation consultants and utilize market and industry data to ensure we compensate fairly and competitively, but not excessively. • Mitigate undue risk-taking by using multiple performance metrics, imposing caps on payouts, employing clawback policies for annual incentive and equity awards, making annual incentive awards subject to complete Committee discretion, and performing annual compensation risk assessments. • Utilize only “double trigger” vesting of equity awards for change in control situations. • Provide multiyear vesting for equity awards, with vesting requirements generally more stringent than peers. • Regularly review compensation, especially incentive design, to ensure continued alignment with Company strategy and shareholder interests. • Set meaningful stock ownership guidelines for the CEO (6 times base salary) and other executives: 4 times base salary for CFO, 3 times base salary for other SVPs, 2 times base salary for other corporate VPs and certain other employees at or above specified grade levels, and 1 times base salary for certain other employees. • Use an appropriate mix of cash and non-cash compensation, with an emphasis on variable (at risk) compensation. • Use premium stock options as part of the non-cash variable incentive compensation program. | • Provide employment agreements to U.S. executives. • Permit hedging or pledging or short sales of Company shares. • Reprice underwater stock options. • Provide discretionary accelerated vesting of equity awards of executives. • Provide excessive benefits or perquisites to executives. • Provide gross-ups for Code Section 280G excise taxes that may be imposed on severance or similar payments made in connection with a change in control. |
Consideration of 2022 Say on Pay Vote Results
Consideration of 2022 Say on Pay Vote Results The Committee reviewed the results of our 2022 “say on pay” vote, in which our named executive officer compensation was supported by more than 96% of the shares voted on the matter. After taking into consideration the strong support for our executive compensation program reflected in our annual say on pay vote results, the Committee decided to continue to apply the same philosophy, compensation objectives, and governing principles as it has used in recent years when making subsequent decisions or adopting subsequent policies regarding named executive officer compensation. Also, after taking into consideration this strong support, the Committee decided to continue using the same executive pay structure of base salary, cash bonus and a mix of restricted stock and stock options, subject to the changes in option exercise prices described herein. We received feedback in prior years that our equity award program could be enhanced by making modifications regarding performance-based equity awards. After undertaking a lengthy review of potential performance-based equity award designs, we decided to modify our stock option award program beginning in fiscal 2019 with the May 2018 awards by providing stock options with a premium exercise price equal to 10% above grant date market value. Also beginning with fiscal 2019 awards, options comprised at least 50% in value of each executive officer’s equity awards. For fiscal 2023, options comprised 65% of the value of the CEO’s awards and 75% of the value of the CFO’s awards. Additionally, the Committee eliminated a significant portion of benefits and perquisites provided to U.S.-based executive officers several years ago. The Committee has solicited the input of our shareholders regarding our executive compensation program at every Annual Meeting since the 2010 Annual Meeting of Shareholders through a non-binding advisory “say on pay” proposal and will continue to seek shareholder input on our executive compensation, in accordance with the provisions of the Dodd-Frank Act, at the Annual Meeting. The following table shows the results of the “say on pay” vote by the Company’s shareholders (and the shareholders of Old STERIS, in respect of periods prior to the Redomiciliation) for fiscal 2018 through 2022.
Recent Activity
| • | Increasing executive compensation to levels that better reflect those of the peer group and other similar industry groups after giving effect to the Cantel Medical and other acquisitions; |
Recent Activity
| • | Approving a change in the strike price of stock option grants for executives, including the CEO, to require that option exercise prices be 110% of grant date fair market value; and |
Roles and Responsibilities
| Independent Consultant to the Compensation Committee (FW Cook) | • Provides the Compensation Committee with analysis and advice pertaining to CEO, executive compensation program design, including industry survey analysis, explanation of current and developing best practices and regulatory changes; • Recommends a relevant group of peer companies against which to benchmark the competitiveness and appropriateness of our CEO, executive and Director compensation; • Analyzes peer companies’ annual CEO and executive compensation to assist the Compensation Committee in determining the appropriateness and competitiveness of our CEO and executive compensation; • Reviews compensation disclosure materials; • Analyzes our compensation practices to assist the Compensation Committee in determining whether risks arising from such practices are reasonably likely to have a material adverse effect on the Company; and • Provides specific analysis and advice periodically as requested by the Compensation Committee. | | Senior Management | • The CEO recommends to the Compensation Committee annual compensation for the other named executive officers and senior executives based on his assessment of their performance and the Senior Vice President and Chief Financial Officer’s assessment of the performance of certain such persons; • Our CEO; Senior Vice President, General Counsel and Company Secretary and Senior Vice President and Chief Human Resources Officer, and other human resources and legal personnel, work with the Compensation Committee Chair to set agendas, prepare materials for Compensation Committee meetings, and generally attend meetings, as appropriate, and prepare meeting minutes; and • Our Senior Vice President and Chief Financial Officer also works with human resources personnel to prepare some of the materials for Compensation Committee meetings. |
Compensation Consultant
Compensation Consultant Frederic W. Cook & Co., Inc. (“FW Cook”) has served as the Compensation Committee’s compensation consultant since November 2016. For fiscal year 2023, as required by the NYSE listing standards, the Compensation Committee considered various independence factors and potential conflicts of interest with respect to the compensation consultant and found the compensation consultant to be independent and that no conflicts of interest existed.
Principal Components of Compensation for Named Executive Officers
| Compensation Component | Description | Objectives | | Base Salary | • Fixed compensation that is reviewed annually and is based on performance, experience, responsibilities, skill set and market value. | • Provide a base level of compensation that corresponds to the job function performed. | | Annual Incentive Compensation | • “At-risk” compensation earned based on performance measured against pre-established annual goals. • Goals are based upon Company-wide financial results as well as goals personal to the executive’s position. | • Incentivize executives to achieve annual goals that ultimately contribute to long-term Company growth and shareholder return. | | Equity Compensation | • “At-risk” compensation in the form of restricted stock awards whose value fluctuates according to shareholder value and stock options with premium exercise prices whose value is solely dependent upon increases in share price. • Award vests based on continued service. • Service requirements generally exceed peers and market. | • Align executive interests with those of shareholders. • Reward continuous service with the Company. • Incentivize executives to achieve goals that drive Company performance over the long-term. | | Other Benefits and Perquisites | • Broad-based benefits provided to Company employees (e.g., health and group insurance), a defined contribution plan and other limited personal benefits where appropriate. | • Provide a total compensation package that is competitive with the marketplace and addresses unique needs and special situations. |
Principal Components of Compensation for Named Executive Officers
The charts below illustrate the relative opportunities between fixed compensation, consisting of base salary, and variable compensation, consisting of bonus, stock options and restricted stock for fiscal 2023. The first chart shows the opportunity for the current CEO and the second shows the average opportunities for the other named executive officers. Base salaries are those shown in the Fiscal 2023 Summary Compensation Table. Bonus amounts shown are for fiscal 2023. Values shown in the charts for restricted stock and stock option awards reflect the fair market value under Financial Accounting Standards Board Accounting Standards, Codification (“FASB ASC”) topic 718 as of the effective dates of grant. Differences in pay mix between the named executive officers are driven by market median pay levels that are used to determine named executive officer target pay opportunities, consistent with the Company’s pay philosophy and objectives, as well as other factors such as performance, experience and the complexity and responsibilities of the position.
Process for Determining Senior Management Compensation
Process for Determining Senior Management Compensation In General Senior management compensation is generally reviewed and established on an annual basis by the Committee. Our fiscal year ends on March 31. Therefore, Committee members typically begin the assessment of compensation for senior management during the second half of the fiscal year. The Committee typically meets again early in the new fiscal year to evaluate the performance of the Company and our named executive officers, and based on that evaluation of Company performance and individual evaluations, to determine bonus amounts, if any, for the recently completed fiscal year, and finalize base salaries, set bonus criteria, and approve equity awards for senior management for the new fiscal year. For fiscal year 2023, the Company’s compensation consultant assisted with the annual compensation reviews for all named executive officers, providing historical and prospective views regarding total compensation for our executive officers. The consultant reports to the Committee for senior management compensation matters and is charged with providing the Committee with competitive pay data and compensation trends, analysis and recommendations. Base salaries, cash bonus levels, equity compensation, and total compensation of senior management are examined against data from multiple sources and surveys developed and provided by the consultant, as described below. The Committee targets the payment of base salaries, cash bonuses and equity compensation and total direct compensation within a general range of 10% above or below the market median of those components, with equity compensation migrating to a level somewhat above median over time. Actual bonus payments and realized equity values will vary based upon Company performance. This is a guideline around which there is likely to be variation, depending on individual factors and business results. Factors used in the process of assessing and determining senior management compensation include individual and team performance, scope of responsibilities and accountability, competitive and other industry compensation data, special circumstances and expertise, business performance, and comparison with compensation of our other senior managers. The CEO also provides recommendations to the Committee for compensation adjustments for the other senior managers. Peer Group and Survey Data The Committee and the Committee’s compensation consultant review market data relating to compensation to help assess the compensation of our senior executives, including each of the named executive officers. This review includes the consultant’s analysis of proxy data from certain healthcare equipment and healthcare supply companies and other companies in similar businesses to those of the Company in a size range of roughly one-third to three times that of the Company (see peer listing below), information derived from compensation surveys, including companies from healthcare and technology industries, and other executive compensation data obtained by the consultant. This data is adjusted by the consultant to reflect the Company’s relative size. Peer group data is used for executive pay benchmarking purposes for the Company’s CEO and CFO. The survey data also is utilized for executive pay benchmarking purposes for all of the named executive officers. We did not select the constituent companies included in the survey data, and the component companies’ identities were not a material factor in the applicable compensation analysis. The Committee evaluates this data with the assistance of its compensation consultant to develop for each executive position target ranges for base salary, incentive compensation (cash bonus), and long-term equity compensation, as well as total direct compensation. These target ranges reflect market median pay consistent with the Company’s pay philosophy. In the third quarter of fiscal year 2022, FW Cook reviewed with the Committee the peer group proposed to be used for executive pay benchmarking purposes for the Company’s CEO and CFO for fiscal year 2023. The compensation consultant regularly reviews the group with the Committee to ensure that the companies comprising the peer group continue to be appropriate. In selecting recommended peers, the compensation consultant focused on companies that are in the health care equipment and health care supplies industries and to a lesser extent, life sciences tools and services, markets reflective of the Company’s primary business and where we often compete for senior executive talent. Also, size measures considered to construct the peer group for fiscal year 2023 included:
Process for Determining Senior Management Compensation
No specific relative weighting was given to any one of these factors in determining peers, although revenue and secondly market capitalization are considered the most important. As a result of this analysis, the consultant recommended that Bruker and Stericycle be removed from the peer group because of size, and that Varian Medical Systems be removed from the peer group due to its acquisition and the resulting absence of compensation disclosure. The consultant also recommended that Baxter International and Zimmer Biomet be added due to size. The proposed peer group for fiscal 2023 otherwise remained unchanged from that approved for fiscal year 2022. These recommendations were considered and approved by the Committee. As a consequence, the Company’s peer group for fiscal 2023 was comprised of the following:
Process for Determining Senior Management Compensation
All of the peer group companies operate businesses generally similar to STERIS and to varying degrees met the Company’s peer group size criteria. On balance, STERIS’s actual or projected financial and other criteria at September 30, 2021 generally fell within a reasonable range around the peer group’s medians in terms of annual revenue (STERIS: $4.6 billion or 66th percentile), market cap (STERIS: $20.4 billion or 30th percentile) and employees (STERIS: 13,000 or 50th percentile). The following table, which is based upon information provided by FW Cook, shows the metrics and the rankings of the Company relative to the new fiscal 2023 peer group at the end of September 2021 that was utilized for the selection of the fiscal 2023 peer group:
2023 Compensation Decisions
STERIS Annual Incentive Compensation (cash bonus) The Company’s Management Incentive Compensation Plan (“MICP” or “Plan”) is generally designed to set target bonus opportunities to reflect the market median for comparable positions and to produce median cash bonus compensation if target results are achieved. Bonus opportunities also are structured to be sufficient to produce top quartile cash compensation when maximum goals are achieved. In general, if threshold levels of performance are not exceeded, executives earn no bonus and their resulting compensation levels are in the bottom quartile. The foregoing performance to compensation relationships are all consistent with the Company’s pay-for-performance philosophy. In fiscal 2023, all executive officers of the Company were selected by the Committee for participation in the MICP at or prior to the beginning of the fiscal year. Also at the beginning of the fiscal year, the Committee approved general metrics for the MICP for fiscal 2023 participants. These metrics are described below and were essentially the same measures as those utilized by the Company in prior years. An individual’s annual incentive compensation target (target bonus level) was expressed as a percentage of base salary received during the fiscal year. The incentive compensation target bonus level was based upon each participant’s level of responsibility. Target bonus levels as a percentage of base salary received for fiscal 2023 were as follows for each named executive officer:
2023 Compensation Decisions
For fiscal 2023, the target bonus for Mr. Carestio was 120.0% of base salary received, which was below the median for both the peer companies and survey companies. The target bonus percentages for Mr. Zangerle and Ms. Fraser each increased by an additional 5% over prior year target bonus percentages and the other named executive officers were unchanged from fiscal 2022. The fiscal 2023 bonuses for each named executive officer were based on performance against full fiscal year 2023 financial objectives and could range from 0% to a maximum of 200% of target bonus based on actual performance. Per the MICP provisions, the Committee also had the ability to modify the bonuses of each named executive officer based upon performance against individual objectives. Financial targets were based on the Company’s operating plan financial metrics for the 2023 fiscal year, as reviewed with the Committee and approved by the Board. The Committee and the Board evaluate the annual operating plan and consider financial metrics important to shareholder value and that support the overall strength and success of the Company’s business. After consideration of the consultant’s compensation data, the recommendation of management, and approval of the Company’s operating plan, the Company financial performance metrics described below were identified and approved by the Committee to establish criteria for calculating bonus compensation targets under the Company’s incentive compensation plans. Consistent with STERIS’s practices for the past several years, for fiscal year 2023 the Committee determined applicable financial metrics and weighting to be:
2023 Compensation Decisions
excluding in each case the effect of amounts related to the following special items that the Committee considers not representative of ongoing operations: impairment and restructuring charges, goodwill impairment charges, amortization and impairment of purchased intangible assets, loss from fair value adjustment of acquisition related consideration, gains or losses on sales of assets outside the ordinary course of business, gain or loss on sales or divestiture of a subsidiary, costs associated with divestiture of discontinued operations, acquisition-related transaction and integration expenses, pandemic-related charges, costs or expenses, and other special or one-time regulatory, tax, litigation, settlement, pension, benefit, or governmental charges, costs or expenses, and the effects of other such items. We chose the two metrics, EBIT and free cash flow, because we believe these two operating metrics are the most representative short-term measure of long-term shareholder value creation; we view EBIT as the key driver of our ultimate bottom line earnings and utilization of a free cash flow objective is intended to incent management to appropriately manage “non-income” cash/balance sheet items (in addition to earnings) like inventory, accounts receivable, accounts payable and capital spending. Under the MICP, the fiscal year 2023 financial performance objectives were as follows: target performance for EBIT and free cash flow for 100% payout under the approved targets for the MICP for the year were $1,218.8 million and $695.4 million, respectively. Spending lower than planned capital expenditures was limited to $20 million to increase free cash flow for bonus purposes. Free cash flow payout percentage was limited to the EBIT payout percentage until EBIT exceeded $1,218.8 million. The incentive compensation payable was capped at 200% of target, regardless of performance above the maximum performance level. To achieve the maximum performance level, EBIT of $1,365.1 million and free cash flow of $834.5 million would have been required. The following table shows achievement of financial objectives for fiscal 2022, as adjusted, as well as fiscal 2023 performance objectives (dollars in millions):
2023 Compensation Decisions
| • | Four other named executive officers—an aggregate payment of $724,096, based on performance against the applicable plan criteria and individual goals and objectives (individual bonus payouts were all 50% of target bonus opportunity). |
2023 Compensation Decisions
Long-Term Equity Incentive Compensation Equity incentives are considered necessary to attract and retain employees critical to our continuing, long-term success, as well as providing employees significant alignment of interest with our shareholders. The Committee views nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units as a direct link between management and shareholders. Equity incentives are provided under the Company’s 2006 Long-Term Equity Incentive Plan (the “2006 Plan”). The 2006 Plan was initially approved by shareholders of STERIS Corporation in July of 2006. The Plan has since been approved by shareholders and amended and restated on several occasions. Most recently, the Plan was assumed, amended and restated by the Company effective March 28, 2019 in conjunction with the Redomiciliation. Also, in connection with the Redomiciliation, all outstanding awards under the 2006 Plan in respect of Old STERIS ordinary shares were converted into equity awards for the same number of Ordinary Shares with the other terms and conditions of the awards remaining the same, except as otherwise required by law. With respect to the amount and type of equity incentives provided to each recipient, the Committee generally considers its compensation consultant’s data regarding competitive trends and practices, the award recipient’s salary and level within our organization, the nature and complexity of the position, the recommendation of the CEO, and the Committee’s own evaluation of the performance of named executive officers and certain other executives, since the Committee members generally have an opportunity to observe their performance and have information on the level of past awards. The Committee ultimately decides the amount and mix of long-term compensation (stock options, stock appreciation rights, restricted shares, restricted share units and other types of equity awards) granted to each named executive officer, other corporate officers, and any other executives who report to the CEO, with input from the CEO. For the past several years, long-term equity awards to each named executive officer have generally consisted of stock options and restricted stock. In keeping with the Company’s approach, the consultant has developed long-term equity award guidelines for consideration by the CEO and Committee for senior management. The CEO and Committee also consider other factors in determining award mix, including retention concerns and the executive’s current equity holdings compared to the Officer Stock Ownership guideline requirements (discussed subsequently) for Company stock, since stock options do not count toward the Officer Stock Ownership guidelines. The consultant’s long-term equity guidelines place more emphasis on options than restricted stock for the CEO and CFO, and generally equal emphasis for other executives. This is consistent with the Company’s pay-for-performance philosophy as all value earned through stock options is solely dependent upon an increase of our stock price, which reflects investors’ views on the Company’s financial performance and long-term prospects. The Committee believes that options provide a strong linkage to the Company’s performance because the executive benefits only if and to the extent the Company’s stock price increases and the vesting provisions help prevent executives from fully capitalizing on near-term increases in stock values. The 2006 Plan provisions prohibit stock options from being granted at option prices less than 100% of fair market value of the underlying shares on the grant date and prohibit options from being re-priced. Beginning in fiscal 2019, option prices for all executive and other employee stock option awards have been fixed at 110% of the grant date fair market value of the underlying stock. The approval of long-term equity incentive compensation for the Company’s regular annual equity awards is typically made early in the fiscal year (April or May) and effective shortly after the date of filing of the Company’s 10-K filing for its prior fiscal year. This was the case for regular equity awards for fiscal 2023. The compensation consultant provides survey data for long-term incentives, reflecting market median data and provides the Committee with equity award guidelines in dollars based upon this data. Beginning with fiscal year 2020, pursuant to a new methodology approved by the Committee in fiscal 2019, share values to be utilized for annual awards were determined shortly before the grant date based upon Company share price averages over a predetermined period following the Company’s announcement of its prior year financial results. These values and the other information were then used in determining the number of options and restricted shares to be awarded to recipients, and values were not modified to reflect any subsequent increase or decrease in value of the Company’s stock between the end of the predetermined period and the effective date of the grant. The value of Mr. Carestio’s fiscal year 2023 equity grants was well below the median of the peer group data and survey data provided by the consultant. Because of market factors and the broader complexity and scope of responsibilities of his position, Mr. Carestio’s long-term equity compensation is greater than the other named executive officers. As part of its oversight of the long-term equity award program, the Committee and management annually review data from the compensation consultant regarding the cost of the equity award program in terms of share usage and value transfer. The Company’s fully diluted overhang from outstanding grants was below the 25th percentile of its peer group at December 31, 2021. The Company’s three-year average share usage was slightly above the peer group median for the period 2019 - 2021. The Company’s three-year average fair value transfer was near or below the 25th percentile of peers in absolute dollars, as a percentage of market capitalization and as a percentage of revenue. On balance, the consultant and Committee believe the Company has prudently managed the equity program in support of the shareholders’ interests. Fiscal 2023 awards to the named executive officers under the 2006 Plan were as follows:
2023 Compensation Decisions
| Name | Number of Restricted Shares | Number of Stock Options | Aggregate Award Fair Values ($) | | Daniel A. Carestio | 9,476 | 79,948 | 6,154,682 | | Michael J. Tokich | 2,256 | 30,748 | 2,051,464 | | J. Adam Zangerle | 3,384 | 15,372 | 1,538,466 | | Cary L. Majors | 2,140 | 9,736 | 973,654 | | Mary Clare Fraser | 2,028 | 9,224 | 922,574 |
2023 Compensation Decisions
Benefit Programs and Perquisites Our named executive officers are eligible to participate in a number of benefit programs, including health, disability and life insurance programs and a qualified 401(k) plan, all of which also are available generally to employees in the United States. None of our executive officers have special retirement benefit arrangements such as supplemental retirement plans or excess or restoration retirement benefit plans. Named executive officers and other senior employees may also participate in other benefit programs, including an employee relocation program and a Senior Executive Severance Plan (see page 72 for a description). The Company’s Senior Executive Severance Plan covers all of the named executive officers. Beginning with fiscal 2020, the Committee discontinued providing most allowances and other perquisites for executives. Agreements Regarding Named Executive Officer Compensation The Committee reviews and approves, or makes recommendations to the Board to approve, any agreements with the named executive officers relating to compensation or separation payments. The Company (including its subsidiaries) has no employment agreements with its executive officers. The named executive officers are party to equity award agreements and covered by the Senior Executive Severance Plan and other plans described in the succeeding pages. These agreements and plans are discussed, in part, in the section of this Proxy Statement entitled “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.” The Committee believes that employment or other special agreements regarding senior management compensation for US-based executives should generally be limited to special circumstances.
Compensation Governance
Compensation Governance We maintain several compensation governance best practices, some of which are summarized in the table that begins on page 46. A more detailed discussion of certain of these practices appears below and other of these practices are mentioned in other portions of this Proxy Statement. Risk Assessment The Committee has reviewed the Company’s employee compensation policies and practices and determined that the same are not reasonably likely to have a material adverse effect on the Company. This determination was based in part on a review of compensation practices and programs conducted by the Committee’s compensation consultant, FW Cook, and by management, with risk being evaluated from several perspectives, including pay mix, award time horizons, award limitations including caps, metric structure, metric alignment with business strategy, payout cliffs, and other practices or policies that mitigate risk-taking. Other risk mitigating factors reviewed included clawbacks, stock ownership guidelines, anti-hedging and pledging policies and equity grant practices, as well as more specific factors with respect to sales and service incentive plans. Clawback and Related Provisions for Annual Incentive Compensation and 2006 Plan Equity Awards The MICP contains “clawback” provisions. Under these provisions, if the Company’s financial statements for any fiscal year are required to be restated due to material noncompliance with any financial reporting requirement as a result of intentional misconduct of a participant, the participant is required to forfeit or return, as applicable, at the request of the Board or Committee, all or a portion of the participant’s award. The amount to be recovered is the amount of the award in excess of that which would have been payable had the financial statements initially been filed as restated. The Company is entitled to obtain repayment by a variety of different methods. The Company will be expanding these provisions in the near-term to reflect new listing standards developed by NYSE in response to required regulations issued by the SEC in 2022 regarding clawbacks from executive officers. The 2006 Plan (equity incentives) also contains forfeiture and recovery provisions for “Detrimental Conduct.” Detrimental Conduct includes acts of dishonesty intended to result in material personal gain or enrichment at the expense of the Company and other acts or conduct detrimental or prejudicial to the business, reputation, or other significant interest of the Company. Restrictions on Securities Transactions The Company maintains an Insider Trading Policy that restricts activities in or relating to Company stock by Directors, executive officers and employees and their respective related persons. These restrictions include advance clearance requirements for Directors, executive officers and certain other employees for all transactions as well as “blackout” provisions. The Insider Trading Policy also includes a blanket prohibition that prevents Directors, executive officers, employees and their respective related persons from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars or exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, decreases in the market value of the Company’s equity securities, whether granted as part of compensation to, or otherwise held directly or indirectly by, such Director, executive officer, employee or their respective related persons. The Insider Trading Policy further prohibits other types of speculative transactions in Company stock, including short-term trading, short sales, option trading and pledging (including margin purchases of Company stock). Officer Stock Ownership Policy One of the primary objectives of the Company’s equity incentives is to build stock ownership among executives, thereby aligning their interests more closely with those of the shareholders. To reinforce this objective, the Committee first established stock ownership guidelines for senior managers of STERIS Corporation in 2006. The guidelines have been subsequently revised on several occasions, most recently to formalize the guidelines as a Policy and expand Policy coverage. The Committee believes the Policy further aligns the interests of senior management with those of the shareholders. Senior managers (including the named executive officers) and other key management members are required to maintain a significant equity interest in the Company through ownership of stock that they acquire either with their own funds or through long-term incentive awards. The Committee believes that stock ownership helps create economic alignment with shareholders and is a factor in motivating our senior managers to enhance shareholder value. The stock ownership requirements are expressed as a multiple of salary rather than a fixed number of shares, as was the case at one time. The Committee believes that this approach, which is consistent with the approach used in the Director Stock Ownership Guidelines, reflects prevailing market practices, and also has the benefit of adjusting for changing circumstances that should influence shareholding requirements. The following table outlines the required officer share ownership values at various levels within the Company, as defined by multiples of base salary for each person:
Compensation Governance
| • | Shares acquired from exercised stock options (unexercised options are not counted); |
FISCAL 2023 SUMMARY COMPENSATION TABLE
FISCAL 2023 SUMMARY COMPENSATION TABLE
FISCAL 2023 SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | Daniel A. Carestio | | | | | | | | | | President and CEO | 2023 | 969,862 | — | 2,154,084 | 4,000,598 | 602,884 | 12,756 | 7,740,184 | | | 2022 | 767,280 | — | 1,397,772 | 2,870,787 | 854,729 | 12,600 | 5,903,168 | | | 2021 | 542,385 | — | 734,161 | 734,701 | 891,377 | 10,145 | 2,912,769 | | Michael J. Tokich | | | | | | | | | | Senior Vice President and Chief Financial Officer | 2023 | 590,356 | — | 512,834 | 1,538,630 | 229,615 | 18,637 | 2,890,072 | | | 2022 | 555,800 | — | 557,762 | 1,676,075 | 454,782 | 15,377 | 3,259,796 | | | 2021 | 536,125 | — | 406,174 | 1,220,258 | 673,181 | 22,119 | 2,857,857 | | J. Adam Zangerle | | | | | | | | | | Senior Vice President, General Counsel, and Company Secretary | 2023 | 506,918 | — | 769,251 | 769,215 | 196,875 | 14,657 | 2,256,916 | | | 2022 | 445,180 | — | 794,046 | 938,626 | 339,864 | 14,988 | 2,532,704 | | | 2021 | 422,820 | — | 498,275 | 498,508 | 495,245 | 22,310 | 1,937,158 | | Cary L. Majors | | | | | | | | | | Senior Vice President and President, Healthcare | 2023 | 442,767 | — | 486,465 | 487,189 | 160,731 | 12,108 | 1,589,260 | | | 2022 | 415,180 | — | 519,137 | 519,944 | 316,932 | 2,262 | 1,773,455 | | | 2021 | 392,105 | — | 393,584 | 393,582 | 459,161 | — | 1,638,432 | | Mary Clare Fraser | | | | | | | | | | Senior Vice President and Chief Human Resources Officer | 2023 | 406,918 | — | 461,005 | 461,569 | 136,875 | 11,954 | 1,478,321 |
FISCAL 2023 SUMMARY COMPENSATION TABLE
| (1) Regular base salary earned. |
FISCAL 2023 SUMMARY COMPENSATION TABLE
| (2) The dollar amounts reflect the closing sales price per share of the Company’s stock on the New York Stock Exchange Composite Tape on the effective date of the grant, representing the grant date fair value for purposes of FASB ASC topic 718. For a discussion of specific restricted stock awards granted in fiscal 2023, see “Grants of Plan-Based Awards in Fiscal 2023” below and the narrative discussion that follows. Restricted stock recipients can vote their restricted shares and will receive cash dividend equivalent payments at the same times and amounts per share as all other shareholders receiving dividend payments. |
FISCAL 2023 SUMMARY COMPENSATION TABLE
| (3) The dollar amounts reflect the grant date fair value under FASB ASC topic 718 for option awards. The aggregate grant date fair value of option awards is computed in accordance with FASB ASC Topic 718, utilizing assumptions discussed in the notes to our financial statements in our Form 10-K for the fiscal years ended March 31, 2023, March 31, 2022 and March 31, 2021, as applicable. For a discussion of specific option awards granted in fiscal 2023, see “Grants of Plan-Based Awards in Fiscal 2023” below and the narrative discussion that follows. |
FISCAL 2023 SUMMARY COMPENSATION TABLE
| (4) The dollar amounts for fiscal 2023 represent incentive compensation paid under the MICP. |
FISCAL 2023 SUMMARY COMPENSATION TABLE
| (5) The dollar amounts for fiscal 2023 consist of employer matching contribution to a 401(k) plan for all named executive officers (including $12,756, $11,976, $11,432, $12,108 and $11,954, respectively, for Messrs. Carestio, Tokich, Zangerle and Majors and Ms. Fraser), and payment of all costs of preparation of U.K. tax returns and U.K. tax advice for Messrs. Tokich and Zangerle, consisting of $6,661 and $3,225, respectively (U.S. dollar values of tax-related amounts were calculated based on the average pound sterling exchange rates for fiscal 2023). |
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023
| Name | Grant Date | Approval Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards; Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | | | | Threshold ($) | Target ($) | Maximum ($) | | | | | | Daniel A. Carestio | | | | | | | | | | | | 6/2/2022(2) | 5/4/2022 | | | | 9,476 | | | 2,154,084 | | | 6/2/2022(2) | 5/4/2022 | | | | | 79,948 | 250.06 | 4,000,598 | | | | | 0 | 1,205,770 | 2,411,540 | | | | | | Michael J. Tokich | | | | | | | | | | | | 6/2/2022(2) | 5/4/2022 | | | | 2,256 | | | 512,834 | | | 6/2/2022(2) | 5/4/2022 | | | | | 30,748 | 250.06 | 1,538,630 | | | | | 0 | 459,231 | 918,462 | | | | | | J. Adam Zangerle | | | | | | | | | | | | 6/2/2022(2) | 5/4/2022 | | | | 3,384 | | | 769,251 | | | 6/2/2022(2) | 5/4/2022 | | | | | 15,372 | 250.06 | 769,215 | | | | | 0 | 393,750 | 787,500 | | | | | | Cary L. Majors | | | | | | | | | | | | 6/2/2022(2) | 5/4/2022 | | | | 2,140 | | | 486,465 | | | 6/2/2022(2) | 5/4/2022 | | | | | 9,736 | 250.06 | 487,189 | | | | | 0 | 321,466 | 642,932 | | | | | | Mary Clare Fraser | | | | | | | | | | | | 6/2/2022(2) | 5/4/2022 | | | | 2,028 | | | 461,005 | | | 6/2/2022(2) | 5/4/2022 | | | | | 9,224 | 250.06 | 461,569 | | | | | 0 | 273,750 | 547,500 | | | | |
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023
| (1) Amounts shown in these columns represent the annual incentive compensation opportunity under the Company MICP for fiscal 2023 for each named executive officer. See “Compensation Discussion and Analysis—Principal Components of Compensation for Named Executive Officers—Annual Incentive Compensation” above for more detail regarding these amounts. For purposes of these calculations, per the MICP provisions, compensation received during the fiscal year during each executive’s period of participation was utilized. |
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023
| (2) Restricted stock and stock option grants made as part of the annual long-term equity grant. All restricted stock and stock option awards were granted under the 2006 Plan. |
NARRATIVE SUPPLEMENT TO THE FISCAL 2023 SUMMARY COMPENSATION TABLE AND THE GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023 TABLE
NARRATIVE SUPPLEMENT TO THE FISCAL 2023 SUMMARY COMPENSATION TABLE AND THE GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023 TABLE
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
| | Option Awards | | | | | Stock Awards | | | | Name | Option Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Stock Award Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Daniel A. Carestio | | | | | | | | | | | 5/30/2017 | 4,500 | 0 | 77.07 | 5/30/2027 | | | | | | 5/31/2018 | 29,864 | 0 | 114.22 | 5/31/2028 | | | | | | 10/01/2018 | 9,468 | 0 | 125.58 | 10/1/2028 | | | | | | 5/31/2019 | 21,651 | 7,217 | 147.05 | 5/31/2029 | | | | | | 6/01/2020 | 13,388 | 13,388 | 182.22 | 6/01/2030 | | | | | | 6/02/2021 | 14,829 | 44,487 | 210.30 | 6/02/2031 | | | | | | 10/01/2021 | 4,730 | 14,190 | 228.36 | 10/01/2031 | | | | | | 6/02/2022 | 0 | 79,948 | 250.06 | 6/02/2032 | | | | | | | | | | | 5/31/2019 | 5,008 | 957,903 | | | | | | | | 6/01/2020 | 4,432 | 847,753 | | | | | | | | 6/02/2021 | 6,056 | 1,158,392 | | | | | | | | 10/01/2021 | 867 | 165,840 | | | | | | | | 6/02/2022 | 9,476 | 1,812,569 | | Michael J. Tokich | | | | | | | | | | | 5/30/2017 | 32,000 | 0 | 77.07 | 5/30/2027 | | | | | | 5/31/2018 | 46,664 | 0 | 0 | 5/31/2028 | | | | | | 5/31/2019 | 36,087 | 12,029 | 147.05 | 5/31/2029 | | | | | | 6/01/2020 | 22,236 | 22,236 | 182.22 | 6/01/2030 | | | | | | 6/02/2021 | 9,074 | 27,222 | 210.30 | 6/02/2031 | | | | | | 10/01/2021 | 2,365 | 7,095 | 228.36 | 10/01/2031 | | | | | | 6/02/2022 | 0 | 30,748 | 250.06 | 6/02/2032 | | | | | | | | | | | 5/31/2019 | 2,780 | 531,758 | | | | | | | | 6/01/2020 | 2,452 | 469,019 | | | | | | | | 6/02/2021 | 2,202 | 421,199 | | | | | | | | 10/01/2021 | 576 | 110,177 | | | | | | | | 6/02/2022 | 2,256 | 431,528 | | J. Adam Zangerle | | | | | | | | | | | 6/01/2016 | 15,000 | 0 | 69.72 | 6/01/2026 | | | | | | 5/30/2017 | 14,000 | 0 | 77.07 | 5/30/2027 | | | | | | 5/31/2018 | 21,536 | 0 | 114.22 | 5/31/2028 | | | | | | 5/31/2019 | 14,433 | 4,811 | 147.05 | 5/31/2029 | | | | | | 6/01/2020 | 9,084 | 9,084 | 182.22 | 6/01/2030 | | | | | | 6/02/2021 | 4,321 | 12,963 | 210.30 | 6/02/2031 | | | | | | 10/01/2021 | 2,049 | 6,147 | 228.36 | 10/01/2031 | | | | | | 6/02/2022 | 0 | 15,372 | 250.06 | 6/02/2032 | | | | | | | | | | | 5/31/2019 | 834 | 159,528 | | | | | | | | 6/01/2020 | 1,504 | 287,685 | | | | | | | | 6/02/2021 | 2,457 | 469,975 | | | | | | | | 10/01/2021 | 606 | 115,916 | | | | | | | | 6/02/2022 | 3,384 | 647,292 | | Cary L. Majors | | | | | | | | | | | 5/31/2018 | 4,932 | 0 | 114.22 | 5/31/2028 | | | | | | 5/31/2019 | 9,621 | 3,207 | 147.05 | 5/31/2029 | | | | | | 6/01/2020 | 7,172 | 7,172 | 182.22 | 6/01/2030 | | | | | | 6/02/2021 | 2,592 | 7,776 | 210.30 | 6/02/2031 | | | | | | 10/01/2021 | 946 | 2,838 | 228.36 | 10/01/2031 | | | | | | 6/02/2022 | 0 | 9,736 | 250.06 | 6/02/2032 | | | | | | | | | | | 5/31/2019 | 2,224 | 425,407 | | | | | | | | 6/01/2020 | 2,376 | 454,481 | | | | | | | | 6/02/2021 | 1,964 | 375,673 | | | | | | | | 10/01/2021 | 692 | 132,366 | | | | | | | | 6/02/2022 | 2,140 | 409,340 |
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
| | Option Awards | | | | | Stock Awards | | | | Name | Option Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Stock Award Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Mary Clare Fraser | | | | | | | | | | | 6/02/2021 | 2,419 | 7,257 | 210.30 | 6/02/2031 | | | | | | 10/01/2021 | 946 | 2,838 | 228.36 | 10/01/2031 | | | | | | 6/02/2022 | 0 | 9,224 | 250.06 | 6/02/2032 | | | | | | | | | | | 8/04/2020 | 1,582 | 302,605 | | | | | | | | 6/02/2021 | 1,836 | 351,190 | | | | | | | | 10/01/2021 | 692 | 132,366 | | | | | | | | 6/02/2022 | 2,028 | 387,916 |
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
| (1) Market Value is computed by multiplying the number of shares or units of stock by the NYSE Composite Transaction Reporting System closing price of Ordinary Shares on March 31, 2023 of $191.28 per share. |
OUTSTANDING EQUITY AWARDS ON MARCH 31, 2023
The vesting schedule for each grant in the above table is shown below, based on the option or stock award grant date, as applicable.
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Daniel A. Carestio(3) | | | | | | | | | 2,712 | 618,878 | | | | | 2,037 | 346,433 | | Michael J. Tokich(4) | | | | | | | | | 4,240 | 967,568 | | J. Adam Zangerle(5) | | | | | | | 8,000 | 1,500,036 | | | | | | | 6,138 | 1,400,692 | | | | | 1,504 | 233,419 | | | | | 819 | 186,175 | | | | | 202 | 34,354 | | Cary L. Majors(6) | | | | | | | | | 2,520 | 575,064 | | Mary Clare Fraser(7) | | | | | | | | | 791 | 175,175 | | | | | 2,712 | 618,878 |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (1) Value realized on exercise equal to the difference between the market price (sale price on exercise date or closing price on exercise date, as applicable) of the option shares at exercise and the option exercise price, times the number of option shares being exercised. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (2) Value realized based on the closing price of the shares on the date of vesting multiplied by the number of shares that vested on that date. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (3) 810 shares were withheld to cover the required tax withholding due on the vesting of the 2,712 restricted shares. These shares vested on May 31, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| 914 shares were withheld to cover the required tax withholding due on the vesting of the 2,037 restricted shares. These shares vested on October 3, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (4) 1,285 shares were withheld to cover the required tax withholding due on the vesting of the 4,240 restricted shares. These shares vested on May 31, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (5) 2,769 shares were withheld to cover the required tax withholding on 6,138 restricted shares. These shares vested on May 31, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| 675 shares were withheld to cover the required tax withholding on 1,504 restricted shares. These shares vested on June 1, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| 368 shares were withheld to cover the required tax withholding on 819 restricted shares. These shares vested on June 2, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| 91 shares were withheld to cover the required tax withholding on 202 restricted shares. These shares vested on October 3, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (6) 742 shares were withheld to cover the required tax withholding on 2,520 restricted shares. These shares vested on May 31, 2022. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
| (7) 235 shares were withheld to cover the required tax withholding on 791 restricted shares. These shares vested on June 1, 2022. |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control We maintain various contracts, agreements, plans, and arrangements (collectively, agreements) that may provide for payments or the provision of other benefits to executive officers following or in connection with any termination or constructive termination of employment or a change in control of the Company or change in an executive officer’s responsibilities. Some of these agreements are available generally to all of our salaried employees on the same basis as, and do not discriminate in scope, terms or operation in favor of, our executive officers. None of the named executive officers are covered by a Company-maintained defined benefit pension plan. All named executive officers are eligible for participation in the STERIS Corporation 401(k) Plan, a defined contribution arrangement. The only other agreements concerning compensation to which any of the named executive officers are party or in which any of the named executive officers participate, that are not available generally to all our salaried employees, are described below.
POTENTIAL PAYMENTS TO NAMED EXECUTIVE OFFICERS UPON TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL
POTENTIAL PAYMENTS TO NAMED EXECUTIVE OFFICERS UPON TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL
CEO Pay Ratio
CEO Pay Ratio In accordance with Item 402(u) of Regulation S-K, we have calculated our CEO pay ratio for our 2023 fiscal year. To prepare this year’s disclosure relating to fiscal 2023 pay, we did not repeat the identification process used for our 2022 fiscal year, as described below, because there has been no change in our employee population or employee compensation arrangements that we reasonably believed would significantly impact our pay ratio disclosure. As a result, under SEC rules, we were allowed to use last year’s median employee for purposes of this year’s pay ratio calculation and disclosure. However, due to the promotion of last year’s median employee during 2022, we have selected the next closest person from last year’s identification process to serve as this year’s new median employee.
Methodology and Pay Ratio
Methodology and Pay Ratio For fiscal 2023, the new median employee’s annual total compensation was calculated in the same manner as the CEO’s annual total compensation was calculated in the Fiscal 2023 Summary Compensation Table. Additionally, as permitted by the regulations, the employer-paid portion of the median employee’s health and dental insurance coverage was included in both the median employee’s compensation and the CEO’s compensation. The employer-paid portion of the CEO’s health and dental insurance coverage was not included in the Fiscal 2023 Summary Compensation Table amount. As illustrated in the following table and based upon the considerations discussed above, we estimate that our fiscal 2023 CEO to median employee pay ratio is 113:1.
CEO to Median Employee Pay Ratio
CEO to Median Employee Pay Ratio
CEO to Median Employee Pay Ratio
| | CEO | | Median Employee | | Annual Total Compensation | $7,759,231 | | $68,915 | | CEO to Median Employee Pay Ratio | 113 | : | 1 |
CEO to Median Employee Pay Ratio
We note that, due to our permitted use of reasonable estimates and assumptions in preparing this CEO pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this CEO pay ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described above. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for the Company. Neither the Compensation and Organization Development Committee nor management of the Company use the pay ratio measure in making compensation decisions.
e
| PAY VERSUS PERFORMANCE(1) | | | | | | | | | | | | Year (a) | Summary Compen- sation Table (“SCT”) Total for PEO (Carestio) (b) | SCT Total for PEO (Rosebrough) (b) | Compensation Actually Paid to PEO (Carestio) (c)(2) | Compensation Actually Paid to PEO (Rosebrough) (c)(2) | Average SCT Total for Non-PEO Named Executive Officers (d) | Average Compen- sation Actually Paid to Non-PEO Named Executive Officers (e)(2) | Value of Initial Fixed $100 Investment Based On: | | Net Income – in thousands (h)(5) | EBIT – in thousands (i)(6) | | | | | | | | | Total Share- holder Return (f)(3) | Peer Group Total Share- holder Return (g)(4) | | | | 2023 | $7,740,184 | — | $2,167,818 | — | $2,053,642 | $15,524 | $144.07 | $176.92 | $107,030 | $1,170,001 | | 2022 | $5,903,168 | $1,156,398 | $11,823,596 | $9,584,917 | $2,354,427 | $5,031,228 | $178.09 | $183.84 | $243,888 | $1,076,769 | | 2021 | — | $6,847,109 | — | $20,016,406 | $2,336,554 | $5,591,256 | $138.50 | $167.11 | $397,400 | $699,380 |
e
| (2) For each of fiscal 2023, 2022 and 2021 (each, a “Covered Year”), in determining both the “compensation actually paid” to our PEOs and the average “compensation actually paid” to our non-PEO named executive officers for purposes of this Pay Versus Performance table (“PVP Table”), we deducted from or added to the total amounts of compensation reported in columns (b) and (d) for such Covered Year the following amounts: |
e
| (4) For purposes of this pay versus performance disclosure, our peer group is the Dow Jones U.S. Medical Supplies Index (the “PVP Peer Group”). For each Covered Year, the PVP Peer Group cumulative total shareholder return was calculated based on a deemed fixed investment of $100 in the index through each Measurement Period, assuming dividend reinvestmen t for the PVP Peer Group . |
Descriptions of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
Descriptions of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results The following charts provide, across the Covered Years, (1) a comparison between our cumulative total shareholder return and the cumulative total shareholder return of the PVP Peer Group, and (2) illustrations of the relationships between (A) the compensation actually paid (“CAP”) to the PEO, or in the case of fiscal 2022, the sum of CAP to both PEOs, and the average of the CAP to our non-PEO named executive officers (in each case as set forth in the PVP Table above) and (B) each of the performance measures set forth in columns (f), (h) and (i) of the PVP Table above.
Descriptions of Relationships Between Compensation Actually Paid and Certain Financial Performance Measure Results
| | |
Notice of Annual Meeting of Shareholders
| NON-EMPLOYEE DIRECTOR COMPENSATION |
Description of Director Compensation for Fiscal 2023
Description of Director Compensation for Fiscal 2023 Non-employee Directors are compensated by the Company for their service as such for each term of office. Company employees serving as Directors are not compensated for their service as Directors. For the 2022-23 term of office, the Chairman of the Board was paid a retainer of $465,000 and each other non-employee Director was paid a retainer of $315,000. The 2022-23 retainers were paid in full at the beginning of the term. Retainer fees are fully vested immediately upon payment, regardless of the form in which paid. Absent an election to the contrary, the $315,000 retainer fee was payable as follows to each Director (other than Messrs. Holland and Martin and Dr. Sohi) for the 2022-23 term of office: $82,000 in cash, $116,500 in stock options and $116,500 in career restricted stock units (“CRSUs”). With respect to Dr. Sohi, as Chairman, his 2022-23 retainer was payable as follows: $123,000 in cash, $171,000 in stock options and $171,000 in CRSUs. However, Directors (other than Messrs. Holland and Martin) were permitted to elect to receive all or a part of the cash or option portions of the fee in Ordinary Shares or CRSUs and to elect to receive the CRSU portion of the fee in Ordinary Shares, and certain of the Directors made these elections. CRSUs are restricted stock units, with each unit representing a share of the Company’s stock. Messrs. Holland and Martin, as newer Directors, had fewer available forms of compensation because they had not satisfied the Company’s Director Stock Ownership Guidelines at the start of their 2022-23 terms. Until such time as they satisfy the Guidelines, they receive their annual retainer in cash up to the maximum of $82,000 and remainder in CRSUs. New Directors are expected to satisfy these Guidelines within five years after beginning their Board service. Messrs. Holland and Martin have served on the Board for less than five years. New Directors who are elected to the Board mid-term receive a prorated amount of their fees in CRSUs. The number of CRSUs or Ordinary Shares a Director is entitled to receive for each annual term will be determined based upon the dollar amount of the retainer fees elected to be received in CRSUs or Ordinary Shares, respectively, and the STERIS per share closing price on the NYSE on the effective date of grant. The number of options a Director is entitled to receive is determined based upon a Black-Scholes’ calculation, and the option price is the NYSE grant date closing price. A Director’s CRSUs will be settled in Ordinary Shares six months after the cessation of the Director’s Board service. Directors will be paid cash dividend equivalents on their CRSUs as dividends are paid on Ordinary Shares. All equity awards to non-employee Directors vest immediately. The Company also pays additional Chair fees to the Chairs of each standing Committee (the “Chair Fee”). The following Committee Chair Fees were paid for the 2022-2023 terms of office: Audit Committee Chair—$25,000; Compensation and Organization Development Chair—$20,000; Nominating and Governance Committee Chair—$15,000; and Compliance and Technology Chair—$15,000. These fees were payable in cash, but each Chairperson could elect to receive all of his or her Chairperson Fee in one of the other forms of compensation. In addition, beginning with the 2021-22 term of office, each Director was paid a Committee membership fee for each Committee on which he or she served (other than as Committee Chair). These fees, which were payable in cash at the beginning of the term, were as follows: $12,000 for
Description of Director Compensation for Fiscal 2023
| Non-Employee Director Compensation: Director Compensation Table for Fiscal 2023 |
Description of Director Compensation for Fiscal 2023
Audit Committee members, $7,500 for Compensation and Organization Development Committee members, and $6,000 per Committee for members of the other standing Committees. The Company discontinued payment of meeting fees in July 2021.
Director Compensation Table for Fiscal 2023
Director Compensation Table for Fiscal 2023
Director Compensation Table for Fiscal 2023
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Career Restricted Stock Units$(4) | All Other Compensation ($)(5) | Total ($) | | Richard C. Breeden | 6,000 | — | 141,466 | 198,331 | — | 345,797 | | Cynthia L. Feldmann | 94,000 | — | 116,476 | 131,341 | — | 341,817 | | Christopher S. Holland | 101,500 | — | — | 232,841 | — | 334,341 | | Dr. Jacqueline B. Kosecoff | 6,000 | — | 136,481 | 198,331 | — | 340,812 | | Paul E. Martin | 95,500 | — | — | 232,841 | — | 328,341 | | Dr. Nirav R. Shah | 95,500 | — | 116,476 | 116,319 | — | 328,295 | | Dr. Mohsen M. Sohi | 123,000 | — | 170,944 | 170,926 | — | 464,870 | | Dr. Richard M. Steeves | 94,000 | — | 131,495 | 116,319 | — | 341,814 |
Director Compensation Table for Fiscal 2023
| (1) These dollar amounts represent the portion of the annual retainer fee paid in cash for the 2022-23 annual term for all nonexecutive Directors. These dollar amounts also include Chair Fees, where applicable, and Committee member fees for the 2022-23 annual term. |
Director Compensation Table for Fiscal 2023
| (2) These dollar amounts represent the portion of the annual retainer fee paid in stock for the 2022-23 annual term and reflect the closing sales price per share of the Company’s stock on the New York Stock Exchange Composite Tape on the effective date of the grant, representing the grant date fair value for purposes of FASB ASC topic 718. |
Director Compensation Table for Fiscal 2023
| (3) These dollar amounts represent the portion of the annual retainer fees paid in options for the 2022-23 annual term, and where applicable, Chair Fees elected to be received in options, and reflect the grant date fair value of stock options granted in fiscal 2023 under FASB ASC Topic 718. The grant date fair value of an award is determined utilizing assumptions discussed in notes to our financial statements for the fiscal year ended March 31, 2022. The grant date fair value estimate for these stock option awards in accordance FASB ASC Topic 718 equaled the compensation cost recognized by the Company during fiscal 2023. |
Director Compensation Table for Fiscal 2023
| (4) These dollar amounts represent the portion of the annual retainer fee paid in CRSUs for the 2022-23 annual term, and where applicable, Chair Fees elected to be received in CRSUs, and reflect the closing sales price per share of the Company’s stock on the New York Stock Exchange Composite Tape on the effective date of the grant, representing the grant date fair value for purposes of FASB ASC topic 718. |
Director Compensation Table for Fiscal 2023
| (5) The aggregate amount of perquisites and other personal benefits did not exceed $10,000 in fiscal 2023 for any of the listed Directors. |
Director Compensation Table for Fiscal 2023
| NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES |
Director Compensation Table for Fiscal 2023
The Board’s non-employee director stock ownership guidelines (the “Guidelines”), require that each non-employee Director own Company Ordinary Shares with a value of at least six (6) times the cash portion of the annual Director fees payable to the Director (determined before giving effect to any election by the Director to receive fees in a different form). The cash portion of the annual Director fees for the 2022-23 term of office was $123,000 for the Chairman and $82,000 for each of the other non-employee Directors (determined before giving effect to any election by the Director to receive fees in other forms). A new Director has a period of five years from the date of initial appointment or election to satisfy the Guidelines. For purposes of the Guidelines, all shares held beneficially directly or indirectly by a Director and all CRSUs, if any, held by a Director will be counted; however, stock options are not counted for Guideline purposes. Based upon the number of shares and CRSUs held by each of our Directors as of April 28, 2023 and our share price of $188.5 per share as of the close of business on such date, each of our then current Directors, other than Mr. Martin, satisfied the Guidelines as of such date. Mr. Martin has until May 2026 to satisfy the Guidelines.
Director Compensation Table for Fiscal 2023
| OWNERSHIP OF VOTING SECURITIES |